Main Justice: Policy Politics and the Law: Former DOJ Attorneys Aim For New Model With GeyerGorey LLP Law Firm

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7/10/2013 Main Justice: “Former DOJ Attorneys Aim For New Model With GeyerGorey LLP Law Firm

 

Antitrust Monitor Blog: Influential Think Tank and Opinion Driver Recommends Harsher Antitrust Fines

The American Antitrust Institute, a Washington D.C. organization, has written a letter to the United States Sentencing Commission recommending that fines for antitrust violations be increased.  The recommendation grows out of work done by Professors John Connor and Bob Lande, who have been studying whether the penalties (including fines, jail time, and civil liability) adequately deter would-be price fixers.  Their study, which looks at a significant amount of data over many years, suggests that price fixing is under-deterred, and that it therefore can be a rational business decision for firms to illegally fix prices, even in the current era of large fines, big jail sentences and private treble damages cases.  They specifically point out that while the Guidelines assume that price fixing raises prices by an average of 10% over what prices would be in a competitive market, there is evidence that this estimate is too low, and should be revised to 20%, if not higher.

http://www.antitrustinstitute.org/~antitrust/sites/default/files/USSCAAILetter.pdf

The Hill: Lobbying World

 

Click Here:  The Hill: Lobbying World (June 25, 2013)

GeyerGorey LLP Opens New York Office

FOR IMMEDIATE RELEASE

PRLog (Press Release) – Feb. 18, 2013 – WASHINGTON — GeyerGorey LLP today announced the opening of a new office in New York. This is the firm’s fourth office.  The New York office now joins with the firm’s Washington, D.C., Philadelphia and Boston offices in providing international and inside-the-beltway experience to individuals and companies that have become — or wish to avoid becoming — the subject of federal criminal law enforcement agency interest. Partner Robert J. Zastrow, resident in the Boston office, will oversee client matters in New York.
GeyerGorey LLP aims to meet the needs of companies for advice and training in compliance with federal criminal laws and in the detection of wrongdoing by corporate employees. The firm also specializes in the defense of white-collar criminal cases. The firm’s Web site may be found at www.GeyerGorey.com.

The New York office is located at 112 W. 34th Street, 17th Floor, New York, NY  10120.  The office telephone number is (212) 920-0676.  For further information, please call Robert Zastrow at (212) 920-0676 or send an email to [email protected].

***Antitrust Monitor (Inaugural Issue): 2013 Forecast***

Renewed Vigilance Regarding Civil Enforcement; Continued Consolidation, Integration and Acceptance of Structural Changes at Criminal Program; Higher Morale

Baer’s Confirmation is unlikely to change momentum, policies or priorities.

As the Obama Administration prepares for a second term, Bill Baer has been confirmed as Assistant Attorney General.  The Antitrust Division’s informal profile photo of Baer captures his genuine humility and good will that many Antitrust Division attorneys will immediately recognize from numerous interactions with him when he represented clients as a partner at Arnold & Porter.  Baer’s easygoing nature is no contrivance and he will build on this long track record of good relations with many of the attorneys and mid-level managers at the Antitrust Division.  In addition to the normal productivity enhancements associated with having confirmed leadership at the helm, Baer’s tenure at the FTC suggests that he will implement an effective management style and push more expansive enforcement goals.  We also believe that Baer’s confirmation will improve morale (discussed more fully below) and Baer will quickly calm the ripples caused by programmatic changes that resulted in field office closure and attrition of seasoned prosecutors in the criminal program.

Continued Civil Enforcement Vigilance 

In its first term, the Obama Administration took some modest steps toward its goal of revitalizing civil enforcement.  The Division repudiated the Bush administration’s monopolization guidelines and expressed a greater willingness to challenge unilateral conduct and exclusionary business arrangements, although it only brought one monopolization case.  That the Obama administration managed a slight increase in second requests is significant since it occurred in the midst of significantly dampened merger activity caused by the financial crisis.  Perhaps the most telling metric was discovered by the Stanford Law Review (SLR Online, 65 STAN. L. REV. ONLINE 13, July 18, 2012):

“[t]he Bush Administration conducted 0.04 investigations per Hart-Scott filing; Obama conducted 0.05 investigations per filing. The Bush Administration made 0.013 second requests for information per Hart-Scott filing; Obama’s made 0.020—a 50% increase on a per capita basis.

Combine this 50% increase with a few more high profile enforcement actions that included AT&T/T-Mobile, H&R Block/TaxAct, NASDAQ/NYSE, and BCBS/Physicians Health, and the Obama administration can make a plausible case that it has already reinvigorated enforcement. During his Senate confirmation hearings in July, Baer told lawmakers that he supported Congressional action to repeal the Supreme Court’s Leegin decision which imposed rule of reason analysis for resale price maintenance where per se analysis, albeit with loopholes, had sufficed in the past.

This was music to Democratic ears in the Senate that clearly prefer more aggressive enforcement.  Senator Herb Kohl, D-Wis had expressed concerns back in July regarding Google potentially using its market power in search engine technology to favor its products and services.  Baer did not answer Kohl’s question as to Google, but he did share his enforcement philosophy generally: “being vigilant whether its Microsoft or Alcoa Aluminum about firms that are successful, and we don’t want to penalize success but to make sure it’s not improperly translated into unfair advantage in other markets, is really a key part of what antitrust is all about.”  This comment suggests a revival of monopoly leveraging, always a favorite of Democrat administrations even if the courts have been less receptive.

Will Baer lead the Division on a path to reinvigoration?  He may have provided an answer last week when he came out of the box swinging against the merger between Bazaarvoice and Powerreviews Inc. (involving online customer reviews for retailers) and Oklahoma Chiropractors (which challenged joint contracting agreements with insurers).  Of these first two significant actions of Baer’s tenure, Bazaarvoice is the one that is suggestive of reinvigoration and expansion.  The customer reviews market is evolving at rocket speed, there are challenges for the government regarding market definition and it is unclear that the barriers to entry can be all that high, particularly when well-funded behemoths like Google and Facebook seem to have position for market entry.  Notably, the company was vocal in its frustration about the “six months” it spent in negotiations with the Antitrust Division, suggesting that it could have announced this challenge prior to Baer taking the helm.  The fact that Baer announced it after he assumed his duties suggests that he sees a strong case.   Certainly it would not have escaped Baer’s attention that a decision like this would allow many to interpret this is a bullish signal that Baer plans to reinvigorate, revitalize and expand the Antitrust Division’s mission regarding civil enforcement.

At the FTC, Chairman Leibowitz, a Democrat, has served as an FTC commissioner for eight years and as chairman for almost four years. As rumors circulate regarding his likely departure, President Obama must consider potential replacements. The president could appoint a new chairman from the sitting Democratic commissioners, or he could choose someone from outside the agency. The president recently nominated Joshua Wright, a Republican, to replace outgoing Republican commissioner J. Thomas Rosch, whose term expired in September. Commissioner Rosch has indicated that he will stay in his position until the Senate confirms Wright. Although no more than three of the FTC’s five commissioners, who each serve seven-year terms, can be of the same political party, President Obama’s reelection ensures a Democratic majority at the FTC. Three of the five FTC commissioners will continue to be Democrats, and the chairman, who appoints the directors of the Bureaus of Competition and Consumer Protection, will also be a Democrat.  Accordingly, there is little reason to expect a new direction in antitrust enforcement priorities.

Continued Consolidation and Integration of Structural Changes at Criminal Program 

In the first Obama term, cartel enforcement was the Division’s top criminal priority to the exclusion of things like procurement fraud.  Almost certainly, these headwinds still exist, but time will tell whether Baer can be successful at reducing impediments to opening investigations that do not present themselves on first impression as Section 1 conduct.  Although people can argue over the causes, the Antitrust Division grand jury investigations plummeted from over 150 to fewer than 60 overall and new openings fell from 66 to 29.  Most of this came at the expense of Department’s procurement fraud program and overall anti-competitive deterrence in the area of government procurements has been grievously affected as a result.

On paper, cartel enforcement was little changed from the Bush years, although some of the Division’s numbers were marginally inflated by splitting criminal information’s in non-traditional ways and there is a widespread concern that the pipeline of “small” or “bread and butter” investigations is dry.  Airline Shipping and Auto Parts are behemoth investigations that generate a wealth of statistics, but there are 90 fewer industries that are the subject of grand jury investigations and it is impossible to measure deterrence that is not happening.

In procurement fraud, the Bush administration gave the Antitrust Division a long leash and authorized its use of resources in most allegations that affected the pre-award contract process.  As the Obama Administration strained its resources to support invigorated civil enforcement and it pushed investigative resources toward financial crimes, the administration implemented a series of policy changes that significantly reduced Antitrust Division criminal investigations.  First, it was made much more difficult for attorneys to open grand jury investigations involving matters that did not present themselves on first impression as suspected antitrust conspiracies.  Since very few antitrust criminal cases ever “present” as fully-fledged antitrust conspiracies (i.e.. evident participation by more than one competitor), investigation requests plummeted.  This effect was particularly pronounced in procurement because so few government contracts are awarded through an invitation for bid (”IFB”) process and more are awarded sole source, best value and through a request for proposal procedure where price is not the only factor.  These contracting schemes make it difficult, if not impossible as a matter of law, to use the Sherman Act to prosecute schemes affecting contracts that were not awarded through an IFB process.

Second, the Antitrust Division implemented a new, computerized tracking system that made it harder to keep open investigations that were not being actively investigated.  Because grand jury authority is held at the AAG level in contrast to the Criminal Division (delegated to the DAAG) and the United States Attorneys’ Offices (delegated to line assistants), getting grand jury investigations opened takes the Antitrust Division greater resources than other components.  Line attorneys refer to this process with dread as “the investigation to get grand jury investigative authority.”  Because the Antitrust Division has to invest greater resources into securing grants of grand jury authority and because this authority requires higher levels of approval, it is relatively unusual to reopen a grand jury investigation after closure.  In the past, keeping investigations “on the books” might allow a staff to focus on another industry or to offer help to another investigative staff on an investigation that had “gone hot.”  It also might allow another contract to be awarded or another coordinated price increase to be implemented that might significantly further the investigation.  For these and other reasons, putting open cases on the back burner became verboten and if investigations did not hit success early on they got closed.  The new case matter tracking system often pushes staffs to make tactical decisions that would be better made later after the emergence of new leads, information or evidence.  Ironically, in some respects, the Antitrust Division now pursues an operations policy that reminds line attorneys of some partner investigative agencies who years ago would have to close investigations and then struggle to reopen them if a staff determined that a three month delay was advisable.  Because case filings (i.e. stats) are the paramount metric, this provides disincentives to working any case that is at all considered “marginal” and the Division’s deterrence footprint has shrunk.

Third, by January 30, 2013, the Division will have closed four of its seven field offices, a move that has adversely impacted morale.  Although this was sold as a serious consolidation plan for which many employees would avail themselves and relocate to Washington D.C. or the remaining field offices (San Francisco, New York, and Chicago), this does not seem to be happening in any great numbers.  Using the Philadelphia and Cleveland Field Offices as examples, we count a total of three attorneys who will be staying with the Division.

Baer’s mission is not an easy one.  He joins the Antitrust Division just prior to the formal shut down of four offices and significant attrition; he joins an Antitrust Division that has fewer raw materials in the investigations pipeline.  Still we have caucused Antitrust Division attorneys who are staying with the agency and there is reason for optimism.  As word filters back that Antitrust Division attorneys who severed or retired were dealt with fairly and considerately, active concerns will dissipate and we believe Baer can drive a newly structured criminal program to fire on all cylinders by the end of this fiscal year.   There could be reinvigorated activity as a rumored new section formed in Washington D.C. (staffed by detailees and transferring attorneys) and offices in San Francisco, Chicago (currently slated for one additional expat prosecutor) and New York receive transferring prosecutors and lateral hires to stem attrition, and we expect to see vibrant competition by attorneys for investigations.  Most notably, the rumored new section in Washington D.C., that will be comprised of expats from some of the closed field offices, will see the National Criminal Enforcement Section (NCES) as its main competition and we expect fierce competition to develop creative strategies for generating new cases.

Former Financial Services Broker Sentenced to 10 months in MuniBonds Investigation

WASHINGTON — A former financial services broker was sentenced today in U.S. District Court for the Southern District of New York, for his participation in conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

Adrian Scott-Jones, of Morriston, Fla. , a former broker for Tradition N.A. , was sentenced by District Court Judge Harold Baer Jr. for his role in the conspiracies. Scott-Jones was sentenced to serve 18 months in prison and to pay a $12,500 criminal fine.

“From soliciting intentionally losing bids for investment agreements to paying out kickbacks to manipulate the competitive bidding process, the conspirators went to great lengths to defraud municipalities across the country,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “Today’s sentence sends a clear message that the division will continue to hold executives accountable for their anticompetitive conduct. ”

On Sept. 8, 2010, Scott-Jones pleaded guilty to participating in multiple conspiracies with executives of General Electric Co. (GE) affiliates, from as early as 1999 until 2006. According to the charges, GE and other financial institutions and insurance companies (providers), offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities hired brokers like Scott-Jones and Tradition to conduct bidding for contracts to invest money from a variety of sources, primarily the proceeds of municipal bonds issued to raise money for, among other things, public projects. Scott-Jones also participated in a conspiracy with representatives of a second provider located in New York City.

According to court documents, in each conspiracy, Scott-Jones gave co-conspirators information about the prices, price levels or conditions in competitors’ bids, a practice known as a “last look,” which is explicitly prohibited by U.S. Treasury regulations. Scott-Jones also solicited and received intentionally losing bids for certain investment agreements and other municipal finance contracts. As a result of Scott-Jones’ role in corrupting the bidding process for investment agreements, he and his co-conspirators deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds used by municipalities for various public works projects, such as water pollution abatement projects and low-cost housing. The department said that the conspiracies cost municipalities around the country millions of dollars.

“Today’s sentencing reaffirms the ongoing success of our efforts to weed out corruption in the municipal bond market,” said George Venizelos, Acting Director in Charge of the FBI in New York. “The FBI will continue to work closely with our partners from the Antitrust Division to protect the integrity of the competitive bidding process in public finance. ”

“Individuals who manipulate the competitive bidding system to benefit themselves will be held accountable for their criminal activity,” said Richard Weber, Chief, Internal Revenue Service Criminal Investigation (IRS-CI). “Quite simply, Mr. Scott-Jones profited at the expense of the towns and cities that needed the money for important public works projects. IRS Criminal Investigation is committed to working with our law enforcement partners to uncover this kind of corruption and secure justice for American taxpayers. ”

A total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation, 19 of whom have been convicted at trial or pleaded guilty; one is currently awaiting trial. Additionally, one company has pleaded guilty.

The sentences announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York Office, the FBI and IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.

Today’s convictions are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Three former financial services executives sentenced in Municipal Bonds Prosecution

FOR IMMEDIATE RELEASE
THURSDAY, OCTOBER 18, 2012
WWW.JUSTICE.GOV
AT
(202) 514-2007
TTY (866) 544-5309

THREE FORMER FINANCIAL SERVICES EXECUTIVES SENTENCED TO SERVE
TIME IN PRISON FOR ROLES IN CONSPIRACIES INVOLVING INVESTMENT
CONTRACTS FOR THE PROCEEDS OF MUNICIPAL BONDS

WASHINGTON — Three former financial services executives were sentenced today in U.S. District Court for the Southern District of New York, for their participation in conspiracies related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced. The three former executives were convicted after a three week trial on May 11, 2012.

Dominick P. Carollo, Steven E. Goldberg and Peter S. Grimm, all former executives of General Electric Co. (GE) affiliates, were sentenced by District Court Judge Harold Baer Jr. for their roles in the conspiracies. Carollo was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine. Goldberg was sentenced to serve 48 months in prison and to pay a $90,000 criminal fine. Grimm was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine.

“By manipulating the competitive bidding process, the conspirators cheated cities and towns out of money for important public works projects,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “The division and its law enforcement partners remain committed to rooting out such corruption.”

According to evidence presented at trial, while employed at GE affiliates, Carollo, Goldberg and Grimm participated in separate fraud conspiracies with various financial institutions and insurance companies and their representatives from as early as 1999 until 2006. These institutions and companies, or “providers,” offered a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Goldberg also participated in the conspiracies while employed at Financial Security Assurance Capital Management Services LLC.

At trial, the Department of Justice asserted that Carollo, Goldberg, Grimm and their co-conspirators corrupted the bidding process for dozens of investment agreements to increase the number and profitability of investment agreements awarded to the provider companies where they were employed. Carollo, Goldberg and Grimm deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country millions of dollars.

“Today’s sentencing of Carollo, Goldberg and Grimm for their involvement manipulating a competitive bidding process of public contracts is the final step in a case that demonstrates the FBI’s commitment to investigate and prosecute those who illegally influence the financial markets for their own profit,” said Mary E. Galligan, Acting Assistant Special Agent Charge of the FBI in New York. “The co-conspirators scheme over many years deprived municipalities across the country of competitive interest rates on bonds, a yield that most cities would say they greatly need. The FBI will continue to work with our law enforcement partners to enforce the laws that protect our financial markets.”

“The sentences handed down today send a clear message that crime motivated by outright greed will land you in jail,” said Richard Weber, Chief, Internal Revenue Service – Criminal Investigation (IRS-CI). “Quite simply, the defendants stole money from taxpayers and conspired to manipulate the competitive bidding system to benefit themselves instead of the towns and cities that needed this money for important public works projects. IRS Criminal Investigation is committed to working with our law enforcement partners to uncover this kind of corruption and secure justice for American taxpayers.”

Carollo was found guilty on two counts of conspiracy to commit wire fraud and defraud the United States, Goldberg was found guilty on four counts of conspiracy to commit wire fraud and defraud the United States and Grimm was found guilty on three counts of conspiracy to commit wire fraud and defraud the United States.

A total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation. Including today’s convictions, a total of 19 individuals have been convicted or pleaded guilty, and one awaits trial. Additionally, one company has pleaded guilty.

The sentences announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York Office, the FBI and the IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.

Today’s convictions are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

Anyone with information concerning bid rigging and related offenses in any financial markets should contact the Antitrust Division’s New York Field Office at 212-335-8000, the FBI at 212-384-5000 or IRS-CI at 212-436-1761, or visit www.justice.gov/atr/contact/newcase.htm.